Quote:
Originally Posted by collie1228
I sent the following question to "Ask Matt" at the USAToday Personal Finance page:
I’ve read several columns and articles on bond funds, and I am not convinced that it is ever a good idea to purchase a bond fund. If I buy shares in a bond fund, the value of my investment may go up or down depending on that fund’s performance in the bond market. I may make money or lose money based on that market. But if I take the same money and buy actual bonds, the worst I can do is get all of my investment back, along with the published interest rate over the period of the bond. Other than default risk, I can’t lose. And better yet, if the prices of bonds go up, I can always sell my bonds at a premium if I wish. Can you come up with an economically sound reason why anyone would rather buy bond funds than the actual bonds?"
Matt's answer to my question was in today's paper, but he really didn't answer my question - in fact he changed the question so he could explain how bond prices work, which I already know. I'm still looking for a good answer to my question - why would anyone buy a bond fund versus buying an actual bond. It seems like a no-brainer to me, but I'm open to be convinced otherwise. Opinions?
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with interest rates at there lows and the only way to go is up anyone that buys a bond fund will more likely lose some of their initial purchase vs puting the money into a bond. And yes you are right, the only risk is default. keep in mind that the bond fund has that risk also. So why does everyone put money in bonde funds vs the bond..........Its called broker commission. good luck to you cyclone59